CFO Focus: Fighting the ‘backtest blues’
Five ways to overcome your inertia on using this great tool, plus four questions to answer to ensure you’re making the most of your backtest
“What good is the warmth of summer without the cold of winter to give it sweetness.” – John Steinbeck
We are all too familiar with the winter blues, the dread that accompanies those long, cold winter days that seem to drag on and zap our energy and motivation. We know it is coming, but somehow it sneaks up on us. It’s unavoidable but, as Steinbeck points out, it’s necessary to appreciate the warmth of summer.
When I recall conversations I have had with credit unions about backtesting, this same “blues” mindset can set in. For anyone new to the concept, backtesting evaluates the accuracy of a forecasting model by using the projected data and comparing the results to the actual performance.
When I walk through the process of backtesting with CFOs, they are often eager to start the process. However, that enthusiasm is completely depleted once it’s time to roll up sleeves and evaluate the test results. The backtest blues set in, and the benefit of the results seem like a distant summer day.
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